On my most recent yearly statistical post for band sizes, Annika asked:
You mention that you special order different sizes and styles, but does it affect your profit? If I asked my local store to do that, would it be a hint that they could expand their size range, or would it be an inconvenience?
While I was formulating my reply, I not only realized my penchant for lengthy explanations created a “tl;dr” comment, but also that people may find the topic to be an interesting entry in my “Retailer’s Perspective” series. For those of you unfamiliar with the shop, our special order policy is a trusting and generous way of providing another level of service to customers. Anyone can order or pre-order styles, sizes, or colors not stocked in the store without leaving a deposit or being under obligation to purchase the garment. However, if the item does work, you receive a 5% discount (10% for pre-orders) as a token of our appreciation for your patience. The policy was born out of our desire to help as many women as we could within the limitations of our space and budget, and overall, the program succeeds. Whether the policy is profitable and sustainable depends greatly on the customers taking advantage of the program, and a retailer needs the right mix in order for a special order policy to be feasible. My business partner/dad and I have discussed our own policy at length and sometimes heatedly because on more than one occasion it has cost us valuable cash flow. Once an order arrives, several possible scenarios can occur which make the difference between a program that is profitable and one that puts a boutique out of business.
Quick Pick-Up & Purchase
The ideal scenario, a quick pick-up and purchase involves a customer visiting the shop within two weeks to purchase whatever they ordered. Not only does this quickly replenish our cash flow, but it also improves overall inventory turnover rate in the shop. Even though we lose a little of the profit margin because of the special order discount, the instant boost to our bottom line, most likely on an item I do not need to repurchase, makes it worthwhile. In this scenario, not only is the special order program profitable, but it also improves sales without adding extra time or labor into the mix.
Long Pick-Up & Purchase
The majority of our customers are not local, and with a strong base of working professional women, time can be a precious, exhausted commodity, the result of which is prolonged pick-up time of several weeks or months. While still profitable for us because the inventory eventually sells with only a small loss to the profit margin, the extended pick-up time is problematic. When a customer does not pick up a bra immediately, our cash flow is tied up in an item we cannot sell. What salvages the situation is the actual purchase because the item does not need to be placed on the sales floor or go into my “oops!” drawers where it is marked down further.
Quick Pick-Up & No Purchase
In some cases, the item does not work while in others, we need a different size. If a customer visits us quickly however, we can order the correct style or size and still have plenty of time to sell the item which did not work. Furthermore, if the customer comes back to buy the right size or style, then we recoup some of our costs too.
Long Pick-Up & No Purchase
You may have guessed we have been working down the spectrum of desirability, and this scenario taxes our resources. As with the above category, there is the chance customers will re-order in a new size or purchase something in the shop, but there are also situations where a customer tries the item on and does not like/want it and does not want to buy or re-order anything. Even if a customer does want to order another style or buys something in stock, we still tied up our cash flow for a long time on an item for which we now have no buyer. As a corollary observation to this scenario, one of the most common reasons for the order not to result in a purchase is fluctuations in weight. My own struggles lately have shown that in as little as five weeks, your weight can drastically change, but in the case of several weeks or a couple months, it’s even easier.
Sadly, some customers never even show up to try on the item they ordered or will call to cancel it after the item arrived, typically after I have been following up for several weeks. Situations like this one are the death of special order programs and the reason many retailers will not consider them. I do my best to follow-up with customers before attempting to sell a bra, but in the meantime, we paid for a bra we cannot sell. Eventually, we give up on you, and then we have to find another person to buy it. In some cases, we have what I call “bra karma,” and a person will walk in the shop that week (or even that day!) and buy the item. It’s surreal and amazing to see. Unfortunately, in other instances, we may have a bra in the store for months or even years.
Whether or not a special order policy works for a retailer depends on how many customers fall in the above categories. Fortunately, 80% of our customers are in the top three categories, which makes it possible to continue offering the program. In fact, for the first two years of operation, the shop survived because of the special order policy, and even now, a large portion of our business comes from the women ordering other colors of bras they tried in the shop. Nevertheless, we did make changes to protect ourselves, including holding basic items for a maximum of four weeks, and asking for non-refundable deposits for certain brands, like Comexim. I also do not advertise the pre-order program on the blog much anymore because I found people who placed pre-orders through emails (as opposed to my regular customers) were only 35% likely to buy it. This led to an unfortunate hodgepodge of miscellany cluttering up the store or filling up the drawers.
My personal suggestion, Annika, is to ask your local store if they would consider a special order policy (if they don’t already have one) and to discuss your personal needs with the sales staff or owner. Most boutique owners I know crave feedback from their customers, and if there is a portion of the market they are not serving, I know they would want to hear how they can do this better. However, if they choose not to have a special order policy, trust me when I say it’s because in their experience, it hurt the store more than it helped.